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OhioBWC - Basics: (Policy library) - File

Policy Name:

Wages

Policy #:

CP-23-01

Code/Rule Reference:

R.C. 4123.61, R.C. 4123.62, R.C. 4123.56(A), R.C. 4123.03

Effective Date:

10/10/2014

Approved:

Rick Percy, Chief of Operational Policy, Analytics and Compliance (Signature on file)

Origin:

Claims Policy

Supersedes:

Any policy or procedure, memorandum or directive regarding wages that predates the effective date of this policy.

History:

New

Review date:

03/01/2019

 

 

I. POLICY PURPOSE

 

The purpose of this policy is to ensure BWC calculates the full weekly wage (FWW) and the average weekly wage (AWW) consistently and in compliance with the law. 

 

II. APPLICABILITY

 

This policy applies to all BWC Field Operations staff.

 

III. DEFINITIONS

 

Allowances:  Payments of a set amount made to an employee at given intervals for a specific purpose.  Allowances are paid without requiring proof that the employee spent the allowance monies on the specific purpose. Common types of allowances include payment for travel, uniforms, laundry and housing. 

 

Average weekly wage (AWW):  The basis upon which to compute benefit payments for: temporary total disability (TT) and Living Maintenance (LM) after the initial 12 week period of disability; death benefits; permanent total disability benefits (PTD); percent of permanent partial disability benefits (%PP); wage loss (WL) benefits; and may be used for payment of living maintenance wage loss (LMWL) if greater than the FWW. 

 

AWW earning period:  The 52 weeks prior to the date of injury (DOI) or date of disability in occupational disease claims (DOD), excluding periodsof unemployment beyond the IW’s control. 

 

Best available evidence:  For purposes of this policy, best available evidence is defined as the more detailed earnings information for the earning period (e.g., a payroll report from the employer is better evidence than a W-2).

 

Bonuses:  Payments made to an employee by an employer, which are in addition to regular earnings. 

 

Cafe 125:  Non-taxable money set-aside from earnings that is generally used for employee contributions towards health care, life insurance or daycare.

 

Deferred compensation deductions:  Deductions the employer makes from an employee’s pay that the employee can receive at some later date.

 

Deferred compensation account disbursements:  Retirement income paid from previously deferred funds. 

 

Earning period:  Period of time used to identify earnings to be included in the FWW and AWW wage calculations.  Earning periods are generally based on full pay periods prior to the DOI or DOD (e.g., 52 full weekly pay periods).

 

Employer contributions to employee health care plan:  Payments made by the employer toward the purchase of a health care plan for the employee

 

Foster child care payments:  Payments made to foster parents to cover the costs of care for a foster child. 

 

Frequency of earnings:  Schedule on which pay is received (e.g., weekly, biweekly, monthly).

 

Full weekly wage (FWW):  Basis for payment of compensation for the first 12 weeks of TT or LM and may be the basis for LMWL if it is greater than the AWW. 

 

FWW earning period: The FWW is based on the IW’s earnings for the six weeks and/or seven days prior to the DOI or DOD.

 

Living maintenance wage loss (LMWL):  Compensation paid to an IW who has completed a vocational rehabilitation program and returns to employment, but suffers a wage loss compared to the wage the injured worker was receiving at the DOI or DOD.

 

Non-working wage loss (NWWL):  The dollar amount of the diminishment in wages sustained by a claimant who has not returned to work because he or she has been unable to find suitable employment.  The extent of the diminishment must be the direct result of physical and/or psychiatric restriction(s) caused by the impairment that is causally related to an industrial injury or occupational disease.

 

Per diem payments:  Payments made by the employer to the employee as a daily expense allowance. 

 

Reimbursements:  Payments made to an employee based on actual cost to the employee, and may require the submission of receipts to the employer (e.g., travel, uniforms, laundry and housing). 

 

Regular earnings:  For purposes of this policy, regular earnings are defined as the hourly rate times hours worked or a regular salary.

 

Retirement benefits:  Pay to an employee who has left employment due to reaching a specific age, or specific number of years of service, or at the election of the employee. 

 

Self-employment earnings:  Net income (income after expenses) an individual earns in association with certain types of solely-owned or partially-owned businesses. 

 

Severance pay:  Pay given to an employee upon termination of employment.

 

Social security benefits:  Payments made by the Social Security Administration to an individual because of retirement, death or disability. 

 

Stipends:  Allowance for daily living expenses paid by the employer. 

 

Tips:  Money given by a patron to a servant, waiter, or other similarly related individual for services rendered. 

 

Temporary total (TT):  Compensation paid to an IW who is unable to return to the former position of employment on a temporary basis due to the work-related injury or occupational disease and who has not been found to have reached maximum medical improvement (MMI).

 

Unemployment benefits:  Benefits paid by the Department of Job and Family Services to an individual who has lost employment. 

 

Vacation pay:  Payment from an employer to an employee for a break or holiday from work. 

 

Working wage loss (WWL):  The dollar amount of the diminishment in wages sustained by a claimant who has returned to employment which is not his or her former position of employment.  However, the extent of the diminishment must be the direct result of physical and/or psychiatric restrictions caused by the impairment that is causally related to an industrial injury or occupational disease. 

 

IV. POLICY

A.    It is the policy of BWC to calculate the FWW and AWW in a claim based on the best available evidence.

1.    It is the responsibility of the IW to provide earnings information for the calculation of wages.

2.    BWC shall request detailed earnings from the IW and employer of record for the 52 fully paid weeks prior to the DOI or DOD. Evidence of earnings includes, but is not limited to:

a.    Payroll reports from an employer;

b.    Copies of check stubs;

c.    Income tax returns signed by the IW or signed by other person who prepared the taxes;

d.    W-2s for the year of and/or year prior to the DOI or DOD;

e.    1099 forms for the year of and/or year prior to the DOI or DOD when accompanied by a Injured Worker Earnings Statement (Wages-IW) form or equivalent statement regarding expenses;

f.     Social security reports of earnings that include the IW’s name;

g.    Employer Report of Employee Earnings (Wages-Emp) form signed by the employer;

h.    Wages-IW form or equivalent signed by the IW.

                              i.        BWC requires wages being reported as income to also have been reported to the IRS.

                             ii.        If BWC suspects that wages reported as income have not been reported to the IRS, BWC may notify the IRS of any discrepancy (e.g., rental income, S-Corporation profits and partnership profits).

3.    BWC shall attempt to calculate wages:

a.    In all lost time claims;

b.    When a claim changes from medical only (MO) to lost time (LT); or,

c.    Upon receipt of an Application for Percent of Permanent Partial Impairment or Increase in Percent of Permanent Partial Impairment (C-92) application. 

4.    BWC will set both the FWW and the AWW when setting wages for compensation other than percentage of permanent partial impairment (%PP).

5.    When setting the AWW for the purpose of paying %PP:

a.    BWC shall set the FWW and the AWW when detailed earnings information is available; or,

b.    BWC shall set only the AWW when detailed earnings are not available. 

B.    BWC shall include the following earnings in calculation of wages, however the list is not all-inclusive:

1.    Gross regular earnings, before deductions such as deferred compensation, Cafe 125, etc.;

2.    Tips;

3.    Self-employment earnings (e.g., Form 1040 Schedule C);

4.    Allowances;

5.    Bonuses related to direct and active participation in employment during the earnings period (e.g., performance bonus);

6.    WWL or LMWL paid in a prior workers’ compensation claim (in addition to earnings from an employer);

7.    Per diem or stipend payments;

8.    Vacation, sick leave, and holiday pay for periods which fall within the earnings period;

9.    Lump sum payouts for vacation, sick, personal or other leave is included for AWW calculation only;

10.  Farm income (e.g., Form 1040 Schedule F);

11.  Earnings reported on the IW’s federal income tax return that are specifically subject to either social security withholding, Medicare withholding, or self-employment tax (e.g., housing allowance);

12.  Income specifically subject to self-employment tax (Schedule SE);

13.  Payment received in lieu of receiving health insurance.

C.   BWC shall exclude the following in the calculation of wages:

1.    Bonuses unrelated to work activity (e.g., shareholder bonus);

2.    Disbursements from previously deferred compensation;

3.    Retirement benefits paid from social security or other retirement programs;

4.    Employer contributions to employee health care plans;

5.    Payment received for foster care of children;

6.    NWWL paid in a prior workers’ compensation claim;

7.    Reimbursements for items such as travel, uniforms, etc.;

8.    Temporary total compensation or salary continuation, including occupational injury leave (OIL), paid in a prior claim;

9.    Unemployment benefits;

10.  Severance pay;

11.  Other forms of income reported on an IW’s tax return that are not subject to social security withholding, Medicare or self-employment tax, including, but not limited to:

a.    Interest income;

b.    Dividend income;

c.    Taxable refunds of state and local income taxes;

d.    Alimony received;

e.    Capital gains;

f.     Other gains reported on Form 4797;

g.    IRA distributions;

h.    Pension distributions;

i.      Income reported on Schedule E (including, but not limited to, rental real estate, royalties, partnerships, S corporations, trusts);

j.      Social security benefits;

k.    Other income not subject to self-employment tax (Schedule SE);

l.      Tuition reimbursement (1098T).

 

D.   Unemployment benefits and setting wages

1.    Periods during which an injured worker receives unemployment benefits are generally excluded from AWW calculation;

2.    Seasonal workers must demonstrate that they were looking for work during periods of unemployment.  Examples of ways an injured worker may demonstrate that he/she was looking for work include:

a.    A signed statement on the Wages-IW form or its equivalent which describes the job search activity, including type of work sought and method of job searches: or

b.    Copies of confirmation from on-line job searches; or

c.    Copies of correspondence with potential employers, job applications, resumes or other evidence of contact with employers.

3.    Weeks during which an IW participated in job training or job seeking skills training for which they were paid will be excluded and the payment will be excluded.  This does not include periods of job training with an employer. 

4.    Periods during which the injured worker received partial unemployment benefits while working, and the earnings for those periods, will be excluded if the injured worker provides evidence that s/he continued to seek work to return to full employment during that period in an attempt to discontinue receipt of the partial unemployment benefits. 

E.    Calculating the FWW

1.    For IWs who have worked a least one full week prior to the DOI or DOD, the FWW is the higher amount of:

a.    The gross earnings, including overtime pay, for the six weeks prior to the DOI or DOD, divided by six; or

b.    The gross earnings, excluding overtime pay, for the seven days prior to DOI or DOD.

2.    For IWs who have not worked at least a full week during the six weeks prior to the DOI or DOD, the FWW is set at the hourly rate multiplied by the number of hours the IW was scheduled to work the week of DOI or DOD.  

3.    No weeks are excluded from the calculation of FWW.  The total earnings for the six weeks prior are divided by six, even if there were weeks with no earnings.

4.    BWC shall set the FWW equal to 1/3 of the statewide average weekly wage (SAWW) for the DOI or DOD in order to pay the first 12 weeks of TT or Living Maintenance if the IW was employed during the applicable earnings period and no earnings information is received.

F.    Calculating the AWW

1.    The AWW is calculated by dividing the total earnings for the 52 weeks prior to the DOI or DOD by 52 minus any weeks which should be eliminated.

2.    Periods of unemployment due to reasons beyond the IW’s control shall be eliminated from the calculation.  Documentation is required to support eliminating weeks from the calculation.  Reasons to eliminate weeks include, but are not limited to: 

a.    Sickness of the IW or a family member whom the IW had to care for;

b.    Pregnancy or parental leave of the IW, excluding an extended period based on the IW’s choice instead of medical necessity;

c.    Industrial depression;

d.    Strike or lockout;

e.    Disability related to a prior workers’ compensation claim;

f.     Non-working wage loss compensation was paid in a prior workers’ compensation claim;

g.    IW was unemployed, but was seeking employment (note additional requirements for seasonal workers in section D.2 above);

h.    IW is new to the work force (i.e., the IW recently graduated from high school or college).

3.    If the IW has not worked for reasons within her/his control (e.g., IW stayed home to care for children or to go to college), those weeks are not excluded from the calculation. 

4.    If the IW presents special circumstances that make the method described in the wages policy and procedures unfair, field staff may use alternative methods for setting wages to provide substantial justice. 

5.    BWC shall apply special circumstances when setting the AWW when it is appropriate.  Examples of situations where special circumstances may be applied include:

a.    IW was new to the work force;

b.    IW was self-employed and suffered a loss of earnings due to an unsuccessful business; or

c.    IW was a volunteer worker.

6.    BWC shall set the AWW equal to 1/3 of the SAWW for the DOI or DOD in order to pay TT or Living Maintenance (LM) after the first 12 weeks or permanent total disability (PTD) if the IW was employed during the applicable earnings period and no earnings information is received.

a.    BWC will not set wages without earnings information solely for the purpose of paying percentage of permanent partial impairment awards as there is no minimum award for this benefit type.

b.    BWC will not set wages without earnings information for the purpose of paying wage loss or living maintenance wage loss as earnings information is required to prove loss of earnings to be eligible for these benefits.

c.    If wages have been set at 1/3 of the SAWW for the DOI or DOD, BWC may reset wages upon receipt of earnings information. 

7.    If the only earnings information received is hours scheduled multiplied by the hourly rate, and TT or LM after the first 12 weeks or PTD is payable, BWC shall set the AWW equal to 1/3 of the SAWW for the DOI or DOD. 

 

G.   When it is within BWC’s jurisdiction, BWC shall issue an order to set or reset wages in a claim.

1.    BWC shall set the initial wages in a claim. 

2.    BWC shall reset wages in a claim unless the IC has previously ruled on setting of wages. 

a.    BWC shall re-evaluate wages upon receipt of a request to reset wages on a Motion (C-86) or other correspondence which is accompanied by new evidence that is better than that which was used in the prior calculation of wages.

i.      If BWC’s evaluation results in a new amount an order shall be issued to reset wages. 

ii.     If BWC’s evaluation results in no change in amount, BWC shall issue an order to deny the request to reset the wages.

iii.    If a request is filed and the accompanying evidence is not better than the evidence previously used to set wages, BWC shall issue an order to deny the request to reset wages.

b.    BWC may issue an order to reset wages when an error in the prior calculation is discovered.

H.   Requests to reset wages in claims where the IC has previously ruled on the setting of wages shall be referred to the IC with BWC’s recommendation regarding the resetting of wages.

 

I.      BWC will adjust previously paid compensation when wages are reset and a BWC or IC order has been issued which includes language that orders the adjustment of previously paid compensation.

1.    When an adjustment to wages is made based on a request from a party to the claim and the result of the adjustment is that additional payment is due the IW, the adjustment will be limited to compensation paid within the two years prior to the filing date of the request.

2.    When an adjustment to wages is made by BWC without a request from a party to the claim and the result of the adjustment is that additional payment is due the IW, all compensation paid in the claim will be adjusted. 

3.    All compensation paid in the claim will be adjusted when the change in wages results in the IW being overpaid.  The amount of the overpayment will be determined after the order to reset the wages is final.  See Overpayment of Compensation policy for information regarding declaring and collecting overpayments.

 

BWC staff may refer to the corresponding procedures for this policy entitled “Procedure for Wages” for further guidance. 


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